What Is a Share Certificate?

Quick Answer

A share certificate is the credit union version of a certificate of deposit (CD). They have higher interest rates than traditional savings accounts and are insured by the National Credit Union Administration (NCUA), but you may pay a penalty to access your money before the certificate’s term is up.

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A share certificate is the credit union version of a certificate of deposit (CD). They have higher interest rates than traditional savings accounts and are a safe place to keep your money. But you may pay a penalty to access funds before the certificate matures, and there are better options for long-term investing. Read on to learn how share certificates work, the pros and cons of investing in one and alternatives to consider.

How Does a Share Certificate Work?

A share certificate works like a bank CD. You deposit money into the account for a specific amount of time, or term, and earn dividends on your investment, similar to the interest you'd earn on a CD.

Share certificates have fixed rates and fixed terms ranging from a few months to several years. They typically have higher interest rates than traditional savings accounts. However, unlike a savings account where you can make deposits and withdrawals when needed, you can't continue to add money to a share certificate after the term begins, and you may pay a penalty if you withdraw your money before the end of the term.

Here's how it works. Let's say you put $10,000 in a 12-month share certificate with a dividend rate of 5%. When the certificate matures, you will have $10,511.62 in your account if you don't withdraw your funds early. You can roll your money into a new share certificate or withdraw it. If you roll the funds into a new certificate, it will earn dividends at the rate the credit union offers at the beginning of the new term, not the original rate.

Share Certificates vs. CDs

Share certificates work essentially the same way as CDs, but there are some differences. The biggest is that share certificates are available at credit unions, and CDs are available at banks. The National Credit Union Administration (NCUA) insures share certificates at federally insured credit unions up to $250,000 per depositor, per institution and per ownership category. The Federal Deposit Insurance Corp. (FDIC) insures bank CDs up to $250,000 per depositor, per institution and per ownership category.

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Are Share Certificates a Good Idea?

Share certificates may be a good option to keep your money safe while saving for a specific goal. You'll earn more than you would with a traditional savings account, and you can align the maturity date with your timeline for using the money. But they may not be your best bet for your emergency fund: You don't want to pay a penalty for accessing cash to cover an unexpected expense or job loss. And if you're looking to invest for the long term, you can probably get a better return elsewhere.

Still not sure whether a share certificate is the best option? Here are some pros and cons to consider.


  • They're safe. Nearly all credit unions are insured by the NCUA. That means up to $250,000 per account owner is protected if the credit union fails.
  • You may earn more. Share certificates typically have higher interest rates than traditional savings accounts, allowing your money to grow faster.
  • You'll get a guaranteed return. Share certificates have fixed interest rates that guarantee returns for the certificate's term.
  • You can create a share certificate ladder. Certificate ladders involve opening multiple share certificates with different maturity dates, giving you access to some of your money at different intervals. This can help you avoid paying a penalty for accessing your cash early.


  • You can't access your money. When you open a share certificate, you won't have access to your money until the certificate matures. You may pay a penalty if you need to withdraw money early, typically expressed in a number of days' worth of interest.
  • You may earn more somewhere else. While share certificates typically provide higher interest rates than share accounts, they're not high-return investments. If you're looking to invest your money for the long term, you can likely earn more elsewhere.
  • The interest rate is fixed. If interest rates rise after you open your certificate, the rate on your account won't reset.

Alternatives to Share Certificates

Share certificates aren't the only place to keep your savings safe. Here are a few other options to consider, depending on your goals.

  • High-yield savings account (HYSA): High-yield savings accounts earn more interest than traditional savings accounts while offering more liquidity than share certificates. However, rates on HYSAs fluctuate, so the rate on your account may decrease after you open it.
  • Money market account: A money market account offers features of both checking and savings accounts. They have higher rates than checking and traditional savings accounts. They also come with checks and a debit card, making it easy to pay your bills while growing your savings.
  • Treasury bills (T-bills): Unlike deposit accounts, which the NCUA or FDIC insures, the United States government backs T-bills. You buy T-bills at a discounted rate and receive the face value when the term is up. The difference between the two is the interest you earn. T-bills have terms ranging from four to 52 weeks, but you can sell them before maturity with no penalty if you're in a pinch and need cash quickly. The interest you earn on a T-bill is exempt from state and local income tax.

Is a Share Certificate Right for Me?

Share certificates are a low-risk way to save. With a fixed interest rate and a fixed term, you know how much your investment will be worth when it matures. Plus, higher dividend rates allow you to grow your savings faster than you could with a traditional savings account. Share certificates can be a good option for short-term savings goals like a down payment on a house or car.

Because you may pay a penalty for withdrawing money early, they may not be the best option for savings you'll need access to often. Additionally, they're probably not your best bet for long-term investing because other investments have higher earning potential.